Exploring the MOOC Business Model

MOOCs are providing institutions with a highly-accessible resource they can use to build their reputation, but the high cost of establishing them may not translate into immediate returns for the institution.

The following interview is with Cathy Sandeen, vice-president of education attainment and innovation with the American Council on Education (ACE). At the recent UPCEA-ACE Online Leadership and Strategy Conference, Sandeen moderated a discussion on Managing the Massive Open Online Course (MOOC) Landscape. In this interview, she discusses the impact MOOCs have had on higher education over the past three years and shares her thoughts on how the MOOC’s expansion into the professional development marketplace will impact continuing and extended education leaders.

1. What impact have MOOCs had on the way institutions see their online programming?

It’s really important to make a distinction between institutions who have been involved in online education for a long time and those who are kind of new to the game. Let’s talk about that latter group first.

As you know, when MOOCs first flashed on the scene, they got a lot of attention. The Silicon Valley start-up platform was really focusing on … institutions that, in many ways, have not participated meaningfully in any kind of online education before. This was really opening their eyes to the possibilities of online education. That’s one way MOOCs have had an impact on the higher education environment. It’s just that: … shining a light on what was possible, shining a light on how we might be able to scale with quality and focusing on the demand for quality education particularly from American higher education institutions.

The story’s a little bit different for those institutions that have been involved in online education all along. For them, I think they knew the value of online and how it can be used to help students and how technology is evolving all the time to improve student learning outcomes.

2. As more institutions began investing heavily in developing these free courses, the questions of business models began to pop up. What are some of the most promising business models you have seen to make MOOCs a viable investment for an institution?

It’s much more complicated because we need to start with, “What are the motivations of the institutions — in terms of getting involved in MOOCs — in the first place?” …

Most institutions went into it for reputation enhancement; in order to build their brands, in order to spread their quality education beyond their immediate region. Others used it for, sort of, a taste test; allowing potential future students to sample the type of education the institution offered.

If this is your motivation, it’s more like an expense; it’s a marketing expense. It’s not necessarily [something] you will receive a direct financial return on. Maybe down the line you can say your enhanced reputation attracted more donors, more students, more research money. But there’s no direct link.

Today, what we know is that most students enrolling in MOOCs are not degree-seeking students. The University of Pennsylvania did a study of a million of its own students that had enrolled in its own MOOCs … and what they found is that most of the students had one or more degrees, almost 65 to 75 percent of the students were outside of the United States and, overall, the aggregate completion rate of the MOOCs was four percent.

If you think about that, if students are looking at this as leisure learning, continuing education, lifelong learning, checking something out, trying a course and they’re getting it for free, are they then going to turn around and then pay for the same thing? I’m not sure we’re going to see turning a free MOOC into a fee-based MOOC. What we have seen is a ‘freemium’ model; so you get some of it for free, but you can add on additional services. So, if you want to take it with your identity authenticated because you believe that will give it greater credibility down the line if you try to use the MOOC for employment purposes. That’s one possible model but I’m not sure that anyone has really figured that out yet.

In terms of institutions looking at the business model for MOOCs, we’re still waiting on that. We’ve seen institutions like Georgia Tech create a low-cost degree program and host it on a MOOC platform, but is that really a MOOC? It’s not free. It’s not open enrollment. It’s kind of morphed into something different.

A pure MOOC play that is purely a free and open online course, providing a sustainable revenue stream for that is probably going to be a challenge. However, taking the MOOC idea and adapting into different formats might give some opportunity for institutions to monetize that particular investment and activity.

3. By the same token, what kinds of models have MOOC providers such as Coursera and Udacity developed to keep themselves viable?

I really can’t say because these are private companies … and I’m not privy to their internal business decisions, so I’m just operating on what I’ve read in the press.

Some of them, Udacity for example, are moving more into the professional development arena where it’s focusing on MOOCs that are valuable to employers in terms of students having obtained certain knowledge, competencies and skills. If you’re operating in the employer environment, there would be an opportunity for some kind of payment or revenue stream from that. … There are other examples of these types of revenue streams that we hear in the press for these MOOC platform companies. Right now as I calculate it in my mind, does it equal what they have received in terms of venture funding? Probably not.

4. Should continuing education leaders be worried about MOOC providers entering their traditional domains in terms of serving non-credit, lifelong learning, continuing education students and now providing professional development?

Deans and vice-provosts in charge of continuing education and extended studies are constantly scanning the environment in terms of what’s going on so, yes, if large MOOC platforms are investing a lot of money in appealing to the professional development market, that’s something to pay attention to.

The trick will be how to differentiate. If we think about MOOCs, they’re probably going to be very focused on higher-level computer science, programming languages and so forth. And these courses will be largely self-study, self-paced. They won’t have a high degree of instructor interaction. That tells me there’s still a lot of space available for continuing education and extended studies units to continue to compete in the professional development area.

But I would definitely keep my eye on what was happening in MOOCs in terms of professional development.

5. Based on what you have seen in terms of the popularity of MOOCs and the effort required to keep them sustainable, what do you think the future holds for them?

The pure massive open online course, the demand for that, is probably reaching a saturation point. They are very effective for an institution that wants to enhance its reputation, to highlight more key faculty and distinctive programs, and I do think it will serve as a sample for students, especially for institutions that may not be name-brand, top-of-mind. … I think MOOCs, in terms of that reputation-building, marketing and outreach, make a lot of sense.

We will see it used a little more into the future in building relationships and maintaining relationships with alumni. I think it can work very well there.

We will continue to see a lot of pedagogical and technological innovation happening in MOOCs and many of those experiments — should they prove beneficial for student learning outcomes — can then be imported into other more traditional, online degree-granting types of programs.

Another positive thing that MOOCs have done is really focused on the learning analytics, the predictive analytics. And so using non-fee, non-credit MOOCs as a way to experiment is really an excellent use.

That said, we will see a lot of variations on MOOCs. So, we’ll see courses that aren’t exactly free but are designed to be able to handle and appeal to a class of 500 students. I think we’ll see more scaling. I think we’ll see importing of content out there in MOOCs, using it as an open educational resource in a hybrid or flipped format in other classes; classroom-based or online courses. So, I think we’re going to see a hybridization of MOOCs. In fact, I wrote a little piece; I call it MOOC 3.0, which is kind of the next step in the path of that evolution.

If there’s anything that MOOCs have done [it’s that] it’s really gotten us excited about the possibilities of online. Even for those of us who were already excited about it, it kind of turned the conversation in a different way. It brought a lot more faculty and institutions into that conversation and I think it got us thinking about, “How can we help students, how might we be able to lower costs, how can we collaborate together in order to serve student needs?” [Those needs] are quite profound these days. We have a lot of students who are in need of quality postsecondary education.

6. Do you have anything to add on managing the MOOC landscape and the business models institutions and continuing ed units are developing to either compete in the MOOC space or compete with MOOC providers?

Keeping up to speed and up to date on what’s happening in MOOCs, sharing best practices among peer institutions, is a good thing to do. It’s really important for an institution who hasn’t yet stuck a toe into the water of the MOOC world to really think very carefully about what their motivations are, what their strategy is, why they are doing it and what they want to get out of it. Because, as you stated in the beginning of your questions, you mentioned the large investment. From what we understand, investment on the part of institutions to develop one of these courses is anything in the realm between $150,000 to $300,000, so it’s quite a large investment and it’s something that an institution will want to think very carefully about before launching that investment.

Readers Comments

I’m curious to know what Sandeen means about adapting MOOCs to a different format to better support a profitable business model. There are only so many ways you can change up a MOOC before it ceases to be a MOOC. I’m concerned that, as institutions and other MOOC providers seek to make these courses profitable, they will keep the “M” (massive class sizes) but discard the “O” (open), resulting in either less accessibility or a lower-quality product.

I don’t see MOOCs becoming a real threat to CE or professional development. Each type of course appeals to a different audience. For example, the sheer size of the MOOC means it can’t be customized in the same way a professional development course can. As well, a MOOC is not an effective way to provide specialized knowledge in any field (unlike a CE course) because there are no prerequisites for enrolling in one. The MOOC is most useful as a low-risk way to introduce students to a field of study or an institution.

I agree that MOOCs, as originally conceived, do not pose much of a threat to CE. However, as the MOOC platforms (both Udacity and Coursera) pivot away from degree seekers toward professional development, working directly with employers to develop content, it is something to watch.

I agree that MOOCs have likely reached a saturation point. We’re already seeing those in higher ed start to poke holes in the trend and question its sustainability. I would say the most valuable contribution of the MOOC is that it has provided a treasure trove of data for higher ed. Through MOOCs, we have been able to identify and assess student behaviors, and at a potentially global scale because of their open enrollment policy.